Order Processing Order vs Replenishment Cycles Order Cycle

Order Processing

Order vs. Replenishment Cycles • Order Cycle – Outbound-to-Customer shipments • Replenishment Cycle – Acquisition of additional inventory, as in materials management • One firm’s order cycle is another firm’s replenishment cycle

Importance of Order Processing • • • Time to complete the activities of the order cycle is the very heart of customer service Order prep, transmittal, entry & filling represent 50% to 70% of total order cycle time in most industries Short & consistent order cycle times generate high levels of customer service

Activities in Order Processing 1. 2. 3. 4. 5. Order Preparation Order Transmittal Order Entry Order Filling Order Status Reporting Time needed to complete each activity depends on type of ordering involved. Speed & Accuracy affect costs and customer service levels

Order Preparation • The activities of: – gathering information needed about products desired & – formally requesting the products to be purchased • May involve: – Determining the appropriate vendor – Filling out an order form by the customer or a salesperson – Determining stock availability – Voice communication of the order – Making selections from a computer menu

Order Transmittal • • Involves transferring the order request from its point of origin to the place where the order entry can be handled Accomplished in 2 fundamental ways: – Manually • • Mailing the order or physically carrying the order Slow, but relatively inexpensive – Electronically • • Toll-free numbers, Internet, facsimiles, satellite communications Almost instantaneous transfer of order information Highly reliable & accurate Can be expensive

Order Placement Technologies Used

Order Entry • Tasks that take place prior to actual filling of order – Checking order information accuracy • Item descriptions, item numbers, quantity, price – Checking availability of requested items – Preparing back order or order canceling documentation if necessary – Checking customer’s credit status – Transcribing order information as necessary – Billing

Comparison of Data Entry Techniques Method of Data Entry Characteristic Keyboard Entry Bar Code Entry Speed 6 seconds 0. 3 to 2 seconds Error Rate 1 error per 300 characters entered 1 error in 15 K to 36 trillion characters entered Encoding Costs High Low Reading Costs High Low Advantages Human Low error rate High speed Can be read at a distance Disadvantages Human High cost High error rate Low speed Requires education of user community Equipment cost Missing/damaged images

Order Filling • Physical activities required to – Acquire the items through stock retrieval, production or purchasing – Packing the items for shipment – Scheduling the shipment for delivery – Preparing the shipping documentation

Order Filling • • Priorities for processing orders can affect the speed at which all orders are processed Alternative priority rules – – – First-received, First-processed Shortest processing time Prespecified priority number Smaller, less-complicated orders first Earliest promised delivery date Orders having the least time before promised delivery date

Order Status Reporting • • Assures that good customer service is provided by keeping the customer informed of any delays in order processing or the delivery of the order Includes – Tracing & tracking the order throughout the entire order cycle – Communicating with the customer as to where the order may be in the order cycle & when it may be delivered

Factors Affecting Order-Processing Time • • Processing Priorities Parallel vs. Sequential Processing – Longest processing times occur when all tasks are completed in sequence • • Order-Filling Accuracy Order Batching – Processing order in groups or batches may reduce processing costs, but may delay order filling • Shipment Consolidation – Holding orders for consolidation reduces costs, but extends order processing time

Info System for a Large Merchandise Retailer Sales Counter Coffee pot sold to customer Bar code item at store Delivery from supplier Coffee maker supplier In-store computer Credit data Payroll Accounting Merchandising Manual register input or Bar code scanning Transmission Dept. Mgr. Review Regional center main computer Corporate Payroll Corporate Accounting Corporate Credit Inventory Management Purchase Order Corporate Annual Report